Among May’s deals was a $2.75 billion issuance by Fannie Mae of SMBS that for the first time included a feature allowing the creation of floater and inverse floater classes. Goldman Sachs and Lehman served as the leads for this transaction, along with Banc of America Securities, Barclays, Bear Stearns, Citigroup, Credit Suisse, Deutsche Bank, Greenwich Capital, HSBC, JP Morgan, Merrill Lynch, Morgan Stanley, Nomura and UBS.

In general, the “agency” transactions involve the issuance of mortgage-backed securities, in each case guaranteed by Freddie Mac, Fannie Mae or Ginnie Mae. Ginnie Mae is part of the U.S. government, while Freddie Mac and Fannie Mae are government-sponsored, publicly-owned companies. In each transaction, the underlying assets were residential mortgage loans. The cash flows on these mortgages support the issuance of securities. The securities were issued in multiple classes, with some of the deals involving more than 50 classes.

This type of mortgage securitization—originally known as a CMO—was pioneered by Cleary Gottlieb in 1983, and now accounts for roughly one-third of the total debt issuances on Wall Street. Economists estimate that the existence of securitizations has reduced prevailing mortgage rates in the United States by about 1/2 of 1% per annum since their introduction.